U.S. Treasury bond yields were bullish yesterday, following the release of housing statistics that failed to match up with analyst forecasts; these numbers included the largest month-over-month decrease in homebuilder confidence, a statistic that proved deleterious in the broader confidence of investors in the state of the country’s economic recovery progress.
As of yesterday, benchmark 10-year notes went up 10/32 in price to 2.713 percent, a decrease from 2.745 percent last Friday, while 30-year bonds moved from 7/32 to yield 3.687 percent, a slight dip from 3.70 percent at the end of last week.
According to data released this week, U.S. homebuilder confidence had plummeted by 10 points from 56 in January to 46 this month, marking the first time since May 2013 that this metric dipped under the threshold figure of 50. Further serving as a headwind was the poor weather conditions in the winter months, a factor that has also dragged other economic statistics down and skewered these numbers to the point where the U.S. Federal Reserve takes them with a grain of salt. A reading of less than 50 means that homebuilders do not have much confidence in U.S. market conditions.
Be that as it may, bond yields had increased due to the above variable, while other variables, such as the New York Federal Reserve’s Empire State business conditions index, ticked downwards and also drove an increase in yields. Further, the U.S. government created just 110,000 jobs last month, or around 60 percent of the 185,000 jobs that analysts had forecasted. In reference to bond yields, the somber tenor of the economic figures released in previous weeks is expected to reduce the impact of the Fed’s January Federal Open Market Committee minutes of the meeting, which will be released later on today.
“The backdrop has changed a lot since that (FOMC) meeting, we’ve got another softish payroll report and we’ve gotten some other weakish data,” posited RBC Capital Markets head of U.S. rates strategy Michael Cloherty. “I think people are going to have to take what the Fed said and then adjust to what you assume the Fed would change its stance to, given the data.”